On Thursday, Wall Street stocks recovered from early losses as investors considered the economic implications of the Federal Reserve’s surprisingly aggressive interest rate stance, while oil prices rose on supply shortage concerns arising from the Russia-Ukraine conflict.
On Wednesday, the Fed announced a quarter-point increase in near-zero interest rates, its first increase in nearly three years as it sought to combat rising prices. The Federal Reserve of the United States also forecasted six more similar-sized rate hikes this year, raising concerns among traders about the impact on economic growth.
Treasury yields in the United States remained just below three-year highs on Thursday, while the yield curve steepened after sitting at its flattest level in more than two years.
The benchmark 10-year and 2-year yields were last at 2.1599 and 1.9261 percent, respectively.
“The dot plot was a big surprise yesterday,” said Thomas Hayes, chairman of Great Hill Capital in New York, referring to the Fed’s interest rate projections.
“The hike was dovish, but the rhetoric and outlook were hawkish. We believe that if they come anywhere close to their projections, the yield curve will invert, resulting in a guaranteed recession.”
On Wall Street, the three major indexes reversed early losses, with the healthcare, energy, consumer discretionary, industrials, and financial sectors leading the way.
The Dow Jones Industrial Average (.DJI) was 0.58 percent higher at 34,261.01, the S&P 500 (.SPX) was 0.58 percent higher at 4,383.3, and the Nasdaq Composite (.IXIC) was 0.49 percent higher at 13,502.88.
“We had a relief rally yesterday, and the market is digesting that today, consolidating a little bit, and trying to get comfortable with reality versus expectations in terms of what the Fed is projecting,” Hayes explained.
Following the Fed rate hike and a similar move by the Bank of England, European stocks rose in choppy trading.
The pan-European STOXX 600 index (.STOXX) gained 0.45 percent, while the MSCI World Index (.MIWD00000PUS) gained 1.46 percent.
Oil prices rose more than 7%, continuing a string of wild daily swings, as the market recovered from several days of losses due to a renewed focus on supply shortages in the coming weeks as a result of Russian sanctions.
Benchmark Brent crude futures rose 8.52 percent to $106.37 per barrel, while West Texas Intermediate (WTI) crude rose 7.62 percent to $102.28 per barrel in the United States.
The US dollar dropped against major currencies, reaching its lowest level in a week.
The dollar index, which measures the strength of the US currency against six major trading currencies, was last down 0.7 percent at 97.797.
Gold gained 1% as the US dollar and Treasury yields fell. Spot gold rose 0.7 percent to $1,941.55 per ounce, while US gold futures rose 1.75 percent to $1,942.10 per ounce.
Source: Reuters
